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Ratliff Details Proposal for Statewide School Tax

AUSTIN - Acting Lt. Gov. Bill Ratliff on Wednesday pitched a plan to retool the state's education funding system by replacing local property taxes for schools with a new statewide property tax.

The proposal would initially set a statewide tax rate of $ 1.40 per $ 100 of property valuation for all residential and business property in Texas. Revenues would be distributed among all 1,040 school districts based on enrollment and other factors.

Districts could levy up to 10 cents more in the tax rate - subject to voter approval - and keep that revenue. Up to 30 cents more could be levied for debt service on school construction.

In laying out the plan to the Select Committee on Public School Finance, Mr. Ratliff said it would simplify the finance system and eliminate what critics call Robin Hood - the feature that requires property-wealthy school districts to share their tax revenues with other districts.

"One of the reasons I came forward with this plan was because I didn't see any other plans that fundamentally change the system," the Republican said. "I think it is time to talk about fundamental change."

Mr. Ratliff said his plan was "revenue neutral" and would not raise more money for schools at a statewide tax rate of $ 1.40. The Legislature would set the rate and could increase it to boost funding for schools.

As far as the impact on homeowners and businesses, the $ 1.40 rate would mean higher property taxes for districts that are now below that level. But taxpayers in other districts would see no increase and could receive a slight reduction in their tax bills.

Mr. Ratliff had no breakdown on how individual school districts would be affected. But state figures show a majority of districts are already at or above $ 1.40 - not counting levies to pay off construction bonds.

The changes in the $ 25 billion school funding system would require a constitutional amendment because the Texas Constitution prohibits a state property tax. The amendment would need both legislative and voter approval.

Members of the select committee questioned Mr. Ratliff at length about the plan during a public hearing in the House chamber on Wednesday. The panel has been studying the state's school funding system for several months and will recommend revisions to the 2003 Legislature.

Sen. Teel Bivins, R-Amarillo, co-chairman of the select committee, suggested that critics might call the proposal the "mother of all Robin Hood plans" because it would authorize the state to collect all property taxes for schools and strip taxing authority from local school districts.

"But you would no longer have to collect property taxes and send them somewhere else," Mr. Ratliff responded, referring to the current funding system in which about 100 property-wealthy districts are giving up about $ 600 million a year in tax revenues to equalize school funding.

Rep. Paul Sadler, D-Henderson, the other co-chairman of the panel, questioned whether the changes were worth the effort if they won't provide the additional funding that schools will need in the future. Also, he said, the plan would severely limit the ability of local school boards to raise extra revenue for new programs and financial emergencies.

Mr. Ratliff acknowledged that the proposal would need alterations, but he argued that no one had come up with a better plan to fix problems in the school finance system while complying with court orders to equalize funding between
high- and low-wealth school districts.

Reaction outside the Legislature ranged from lukewarm to hostile.

David Dunn of the Texas Association of School Boards said his group's top priority was to provide greater funding capacity for school districts.

"At first blush, it does not appear that this plan would provide that," he said, also noting that school boards in the past "have been very protective of their ability to adopt budgets and tax rates - and this certainly appears to constrict that."

Peggy Venable of the conservative Texas Citizens for a Sound Economy called the plan a tax increase that will dilute local control of schools.

"In this plan, the state of Texas would be the King of Nottingham, while Robin Hood and his merry men in Sherwood Forest would take more from us all, not just the rich," she said.

In laying out the basic provisions of the tax plan, Mr. Ratliff said if the Legislature adopts the proposal, it should also consider a supplemental property tax to fully fund the teacher health insurance plan that was approved last year. The program is being phased in slowly and will only be offered to employees in smaller school districts this fall.

Mr. Ratliff noted that even with a state property tax, the Legislature would provide other state aid as it has in the past. Currently, school districts receive 53 percent of their funding from local property taxes, 43.5 percent from state aid and 3.5 percent from the federal government.

The state share of education funding would rise to more than 90 percent under his plan.

The current finance law, passed in 1993 in response to an order from the Texas Supreme Court, achieves funding equity by requiring high-wealth districts to share their property tax revenues with low-wealth districts. That provision has been unpopular with many lawmakers, and legislative leaders have said they want to eliminate sharing of property taxes when the finance system is overhauled next year.